/View.info/ The analyst unit of Raiffeisen Bank International AG (RBI) – Raiffeisen Research, reduces its forecast for the GDP of the United Kingdom for the next two years from 1.7% to 1% for 2017 and 0.9% for 2018. For the Eurozone, however, the forecast is reduced by only 0.2 percentage points – 1.5% for 2017 and 1.7% for 2018.
EU members in Central and Eastern Europe (CEE)1 will also feel the effects, but according to Raiffeisen Research Chief Economist Peter Brecinschek, they will be political rather than economic. In Vienna, Brecišek presented Raiffeisen RESEARCH’s strategy for Central and Eastern Europe and Global Markets.
“As the consequences and roadmap for Britain’s exit from the EU are still very difficult to predict, risk aversion will prevail in financial markets. This means interest rates and government bond yields will remain at historic lows levels for a longer period. Equity markets face high volatility, but we do not expect further sell-offs. Britain will no longer be a net donor to the EU budget or contribute less as a member of the European Economic Area from 2019. In the medium term, this will have a negative impact on Poland, Hungary and the Czech Republic, which are the largest recipients of transfer payments. We may also see a decline in investment activity due to the uncertain situation will be a leading topic and the enlargement negotiations with the countries of South-Eastern Europe are not expected to be completed until 2020”, thus Brecinšek commented on the political consequences of Brexit for the Central and Eastern European region.
Overall, the economic effect on Central and Southeastern Europe will be moderate due to solid fundamentals and few macro imbalances. While the 2016 GDP forecast for Central Europe (3.0%) and South Eastern Europe (3.2%) remains stable, for 2017 Raiffeisen Research gradually lowered its expectations by 0.2 percentage points on an annual basis: Poland (3.8%), Czech Republic (2.7%), Hungary (2.7%) and Slovakia (3.3%). This is as a result of the expected slower economic growth in the UK and the Eurozone, and the continued political uncertainty in the EU, which may have a negative impact on exports and investment growth in Central European countries in 2017, compared to previous years expectations.
Falling prices in many Central and Southeastern European countries, combined with relatively high wage growth and rising employment, are boosting individual consumption. As consumer prices are forecast to remain at very low levels for longer than expected, household purchasing power will be a determinant of consumer demand in the coming quarters.
Since the beginning of the year, Russia and Ukraine have shown signs of coming out of recession, with a recovery trend expected in the second half of 2016. Rising prices of goods and services and net exports contribute to this positive development. That is why Raiffeisen Research analysts raised their forecast for Russia’s GDP for 2016 from -2.0% to -0.5%, and firmed up their expectations for Ukraine’s GDP growth for the year to 1.5%. For 2017, GDP growth is expected to reach 1.0% in Russia and 2% in Ukraine.
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